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Black Swan Farming

paulgraham.com

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Re: Black Swan Farming

#101

Post by harryh »

ten_fingers wrote: post #67

PG, In part you are correct, but you are making some huge mistakes and, in a saying from my past, are "straining over gnats and forgetting elephants". > That's made harder by the fact that the best startup ideas seem at first like bad ideas. I've written about this before: if a good idea were obviously good, someone else would already have done it. That's likely true from what you and Silicon Valley see, but that's j…

I'm sympathetic to what you are saying, but the DoD bit is the worst part of your argument. The DoD wasn't trying to profitably conduct (or fund) research.

Re: Black Swan Farming

#102

Post by pmarca »

maxdemarzi wrote: post #8

There is going to be nothing that will "explain" why or which companies could be the big winners. Trying to is falling into the narrative fallacy trap Taleb writes about. Best strategy is to "win" in other ways, and let the cards fall where they may.

Taleb has an exact translation of what Paul is talking about -- Taleb would, and has, described what Paul is saying as "construct a portfolio of cheap high-risk long-dated options, each of which has a high probability of losing all of your money but also uncapped upside". "Uncapped upside" being the key, of course.

Taleb's new book coming out soon will describe all this in a lot more detail -- should be very interesting.

Re: Black Swan Farming

#103

Post by ten_fingers »

ten_fingers wrote: post #87
ten_fingers wrote: post #81

Earlier quoted context omitted.

Okay, you dirty, filthy, rotten chicken bastards, ANSWER with THOUGHTS or STOP the voting attacks, you dirt bags.

More attacks. No thoughts. WHAT a flock of bird brains.

Come on bird brains, cough up what passes for thinking in your flock of losers.

"Losers"? Sure: As the limited partners know all too well, the returns over the past 10 years from the 'information technology' venture capital 'asset class', in highly technical terminology, just SUCK. And PG's essay provides more evidence of the struggles to make money.

Bluntly, on average, even including the big winners, the HN flock is losing. So how to pick winners is a pressing issue with good answers not yet widely implemented or known.

So, I give some answers with rock solid foundations, and you HN bird brain chickens attack with votes but no thoughts. WHAT a flock of losers.

And since only a tiny fraction of users can downvote, no doubt the down votes are from mods. WHAT a bunch of yellow, brain-dead, bird-brain, head in the sand, chickens.

Re: Black Swan Farming

#104

Post by [deleted] »

pg wrote: post #59
thaumaturgy wrote: post #55

Earlier quoted context omitted.

Off-topic, but something I've been chewing on lately: what's it like to have your every written (or spoken!) word analyzed by a bunch of people? Esp. people that you end up having some form of contact with. It seems like it would be difficult to just have a public conversation about a topic. Do you think about that much when you write?

It's pretty grim. I think that's one of the reasons I write fewer essays now. After I wrote this one, I had to go back and armor it by pre-empting anything I could imagine anyone willfully misunderstanding to use as a weapon in comment threads. The whole of footnote 1 is such armor for example. I essentially anticipated all the "No, what I said was" type comments I'd have had to make on HN and just included them in t…

[deleted]

Re: Black Swan Farming

#105

Post by alex_c »

dschobel wrote: post #62
pg wrote: post #49

Earlier quoted context omitted.

I mean it. Have you met either of them? They both seem unstoppable.

It strikes me as smacking of old-school fatalistic "some are born winners" type thinking which is fundamentally contrary to everything we are led to believe about startups (namely; success is a function of smarts, hustle and luck). I have not met either of them. And while I have met a few individuals who have achieved success I can honestly say I have never met anyone who I thought radiated success or was otherwise p…

You are, perhaps, reading too much into the word "winner" to mean "automatically succeeds" rather than "is unstoppable and bowls over obstacles that would stop most people".

Have you never met anyone with an unusually high mix of intelligence, determination, focus, and charisma (to randomly pick a few traits)? If you have, are you more likely to bet for or against them in their chosen field?

If you haven't, that is entirely possible. Such people are, by definition, rare.

Re: Black Swan Farming

#106

Post by Alex3917 »

paul wrote: post #23
mikeleeorg wrote: post #9

Earlier quoted context omitted.

If I had the time, I would do a bunch of research into trying to determine what made Dropbox, Facebook, AirBnB, et al, succeed in their markets. I assume the answer involves the founding teams, but what traits did these founders have that others did not? I don't have the time though, so if any bloggers/journalists are reading, this could be an interesting article, or even book, if you get enough info. Whether or not…

As best I can tell, success = luck * skill. The big successes that I've seen all have exceptional founders, but that's clearly not enough. Timing is a huge component as well. Often a good idea will fail simply because the market or technology isn't ready. My own experience with Gmail reflects some of that. When we decided to write the whole frontend in JS, everyone said that it was a bad idea doomed to failure. It ha…

"As best I can tell, success = luck * skill."

The actual formula that academics use is Performance = AMO, ability * motivation * opportunity. I think there are a couple of modified versions but I can't remember what they are off the top of my head.

Re: Black Swan Farming

#107

Post by abbasmehdi »

ten_fingers wrote: post #87
ten_fingers wrote: post #81

Earlier quoted context omitted.

Okay, you dirty, filthy, rotten chicken bastards, ANSWER with THOUGHTS or STOP the voting attacks, you dirt bags.

More attacks. No thoughts. WHAT a flock of bird brains.

I think you might have not been down voted as much if you had written less sarcastically and with more practical solutions (versus ideological). The solutions you are offering are so general that by following this high-level point of view we can solve world peace, world energy and world poverty and still make the evening tea.

You see HN is mostly a community of "doers", and though the ideas you presented might have merit among circles of people who.. discuss big ideas (for the lack of a better description), a community of doers says and does things they can actually attempt doing today, tomorrow, or in a week with a reasonable probability of success. I am not attacking you, just trying to explain why I think you're being down-voted.

These might be helpful, specifically the comments section: http://ycombinator.com/newsguidelines.html

Re: Black Swan Farming

#108

Post by gersh »

paul wrote: post #12

The counter-intuitive nature of startup investing is a big part of what makes it so interesting to me. In most aspects of life, we are trained to avoid risk and only pursue "good ideas" (e.g. try to be a lawyer, not a rock star). With startups, I get to focus on things that are probably bad ideas, but possibly great ideas. It's not for everyone, but for those of us who love chasing dreams, it can be a great adventure…

So, if you randomly decided which startups to invest in, would you be more successful? Can you really predict anything? If you randomly invested in 100 startups, would your returns be better than your screening process? Can you test this?

Re: Black Swan Farming

#109

Post by majormajor »

paul wrote: post #12

The counter-intuitive nature of startup investing is a big part of what makes it so interesting to me. In most aspects of life, we are trained to avoid risk and only pursue "good ideas" (e.g. try to be a lawyer, not a rock star). With startups, I get to focus on things that are probably bad ideas, but possibly great ideas. It's not for everyone, but for those of us who love chasing dreams, it can be a great adventure…

You mentioning rock stars make me wonder if being a scout for a record label is similar. A band that's going to define a new genre or movement will sound nothing like anything currently popular, so it seems you have to identify the things that sound nothing like what's popular but that sound like what will be popular.

The returns aren't as dominated by just a few big successes, though. Although I suppose one-hit wonders are a manifestation of something similar: All the returns come from one song out of who knows how many dozens a band or artist may have come up with.

Re: Black Swan Farming

#110

Post by aangjie »

mnutt wrote: post #68
cperciva wrote: post #13

Quoth pg: It would hurt YC's brand (at least among the innumerate) if we invested in huge numbers of risky startups that flamed out. Paul, you're sounding like a venture capitalist who is worried about whether he can find investors for his next fund. I would posit that the people whose opinions you should care about are potential founders ; and that their primary concern is themselves , not the performance of a fund…

It would hurt founders' perceptions but wouldn't actually decrease any individual founder's chances of success. YC would just accept a bunch of people who aren't likely to get funded. What would happen if you split up the batches into two groups, YC Classic and YC Black Swan, and placed founders into the groups post-interview? People who were placed in YC Classic could continue to have the expectation of ~100% demo d…

Interesting, but am not sure it'll work from a marketing/founder-motivation perspective. There may be a segregation VCs can see, but it is not clear what effects it'll have on the company/founder's future efforts/commitment to the startup business.

The group-think effects are to be considered, before adopting this model. Am obviously not predicting anything, except perhaps this move might make the Black swans even more unpredictable.i.e: if you look at the Tableau of payoffs here(http://edge.org/conversation/the-fourth-quadrant-a-map-of-th...). this move can push investments from complex payoffs to very complex payoffs easily. Personally, i am likely to even shoot for the YC Classic group deliberately or in rare optimistic moments, the Black Swan group.

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